Most people are only familiar with history as it is presented in class rooms and in news and media headlines. For most this translates to knowing only that which school boards admit into official classroom reading or frequently decorate news and online headlines. 

Consider this example:

A country sends its own military troops to attack its own citizens. Hundreds of thousands of workers protest conditions and mass assemble in the streets. Many are shot by government military forces. There are riots in the streets. Burning of real estate and bonfires in the roads. A polarized population split between working poor and the extraordinary wealthy who control the government. There is vandalism &  looting which leads to more military crackdown and shootings.

Now guess what situation and country and time period I just described?

Egypt during the past year? Perhaps.

Syria? Could be. 

Greece? Would certainly fit the description.  

I bet one example you were not thinking of was the Great Railroad strike of 1877 right here in the United States. You probably did not have the mass riots of the Gilded Age in mind, triggered by the Carnegies, Pullman and many of the industrial titans of the era that refused to grant better working conditions to laborers and instead followed a philosophy of Thomas Scott who declared that strikers be given “a rifle diet for a few days and see how they like that kind of bread”. 

How about this example: The Great Depression

What comes to mind?  

Surely you might be thinking The Great Depression as in that triggered by the stock market crash of 1929, which eventually led to widespread economic woes of 1931-1934 (many don’t believe it ended there as there was a recession within the depression around 1937). 

Right? But this would not be a worthwhile article to read if the reply was that simple. 

How about the Great Depression of the mid-1890’s? That one is not so much fun to talk about in classrooms since it’s the nineteenth century and we’re now in the 21st century. 

How about the The Panic of 1907? Which is one where Conrad Hilton personally experienced and wrote about in his book “Be My Guest”. 

History prefers to talk about more common and recent events which supersede older ones.

But the great depression of the mid-1890’s was just as real as any depression. It brought the Gilded Age to its knees. Lenders called in their loans for immediate payment (sound familiar?). It lasted 4 long and torturous years. The government instituted a tight control on money utilizing the gold standard thinking it would help. It did not. Gold, the path toward monetary practices and the industrialized titans and banking centers of the East were demonized and popularized in parable Form by the author L. Frank Baum when he wrote “The Wonderful Wizard of Oz”. 

Did you know “Oz” stands for the abbreviation of one troy ounce of Gold? The path to Oz being the gold standard (yellow brick road).  L. Frank Baum indeed intended to apply a moral to his story much the same way Aesop talked about political and economic problems of his day using parables, fables and tales. To some The Wizard of Oz is a great children’s fairy tale. To others it’s a political commentary on society and politics of the immediate period preceding its writing. 

Am I boring you? 

I hope not. Because when you learn and understand history, and go beyond the last 100 years. You find patterns. Patterns that can help you prepare for your business and economic well-being. 

For example, here’s another pattern I found by digging up all the recessions and depressions since the founding of our country. I won’t bore you with each statistic as all this information is easily found online and in federal and historic documents. 

Ready for my discovery? 

This one might shock you. After I combined all the recessions and depressions since the late 1700’s (essentially the founding of our country) I found on average, the United States of America has a recession and/or depression every 4.6 years. You must be thinking “Wow” that’s not a lot of time to experience prosperity is it!?

So you get about four and one-half years “free ride” of relative levels of economic prosperity in this country before the economic buffalo dung hits the blades of the electric fan all over again. It’s now been 3 years since the “crash” of 2008/09. Get my drift? 

That means you should be building up your savings account, ING account, CD’s, or other forms of guaranteed investments (whole life would fit into the definition of guaranteed returns) during each of those brief periods of economic surges in order to withstand the inevitable downslide coming afterwards. Notice I did not include stock or mutual funds in my definition of “savings”. 

From a 200 year perspective, the American economy is more like the game of chutes and ladders. You climb for 4.6 years and get to earn wealth, then you slide down the chute. Hopefully the chute won’t take you to a level further below where you came from. Then you get to climb up another ladder, hopefully a few steps taller than the last, and repeat. On each up and down cycle you might, if planned properly, get to stash away some reserves for your family’s well-being. 

The trick is to underspend during the booms (so you can stash and save) and have reserves during the busts so you don’t have to worry or panic. From this zoomed out perspective we can see recessions and depressions cannot be avoided. Ever.  Any politician leading you to believe they have the magic bullet is lying. The only resource you have is the knowledge knowing these cycles are normal inhaling and exhaling cycles of our economy and you should never expect boom periods to endure but for a brief period. 

Another way of looking at it is following the paper trail. Money tends to flow toward business owners, accumulate there. Then they go bankrupt from over expanding and have to sell off houses or businesses, and it flows back into the general economy again. 

Apparently legions of Ivy-league MBA’s working for all the investment banking companies forgot this during the craziness of the real estate boom that peaked around 2003-2005. It plateaued 2006-2007. And went on its wild ride down the chute as it inevitably had to. 

Even Alan Greenspan astoundingly was blind to this when he wrote in his book that he saw some “froth” but no evidence of a bubble. He published the book in 2007 and any realtor who saw sales plummet 60% or more during that year would have stated otherwise.  Interesting he would make such a comment in a book titled “The Age of Turbulence”. 

Congress, the Senate and government officials looked at Mr. Greenspan as if he’s some kind of auricle. He just happens to speak well, has a pleasant, authoritative voice and tone, and for an economist is relatively tele and photo-genic. He holds up well under congressional sub-committees and doesn’t stutter or wilt. But that’s it. None of that means he knows more than the average person with common sense, like you and I, can figure out.  

For recruiters and search firm owners you now have a plan to follow. You should live below your means during boom times, avoid over extending or becoming excessively jubilant and instead prepare for the next economic hiccup. 

By the way, I believe we’re entering a “recession” all over again. I hate to burst your bubble.  That means right now you should be taking your 2011 and 2012 strong earnings (for those fortunate enough to reap these last few years) and prepare for the next fun slide.  I share this with my friends and colleagues only because one of the areas I was never properly provided sufficient training in was “managing my billings” and “personal financial planning”. Even though I took a college course on this. 

In fact none of the cycles or statistics I just cited were covered by my college courses at the time and certainly not by any exuberant industry “recruiting trainers” who led me to believe my billings could be relied on in perpetuity as long as I did “this” or “that”. 

Now you know better. Don’t say I didn’t warn you.